Dutch giant Royal Philips Electronics NV has issued a warning to shareholders to be wary of a stock purchase offer from Toronto-based TRC Capital Corp.
TRC has offered to buy up to four million, or about 0.5 per cent of Philips’ shares, in what is known as a mini-tender, for $19.25 per share. Philips is currently trading around $20.77.
Philips spokesman Steve Klink said the company had no connection with the offer and doesn't endorse it.
Mini-tenders are offers to buy at less than the current market price.
Such offers can be a chance for a large shareholder to sell at a guaranteed price, or for holders of odd lots to sell without paying a commission.
Odd lots are less than the standard board lot, usually of 100 shares, which require higher selling commissions.
But the U.S. Securities and Exchange Commission has warned that many mini-tenders are made in hopes of duping unwary small shareholders who may confuse the bid with a takeover offer, which is usually done at a premium to the current market price.
An investor alert issued in 1999 by the Canadian Securities Administrators warned that shareholders “should carefully examine a mini-tender to determine whether it is in their interests to tender to it.“
Because they are a bid for less than 20 per cent per cent of a company’s shares, they do not trigger the same rules and shareholder protections that a bigger offer would.
For example, there are not the same requirements for disclosure about the terms of the offer, and less protection for shareholders who later change their minds about accepting the offer.
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